A grassroots coalition that helped establish the Educational Opportunity Tax Credit, a college affordability program for individuals who have earned a college degree in Maine and continue to live and work in the state. This program may provide significant tax benefits to Maine residents paying back eligible student loans.
The Educational Opportunity Tax Credit (EOTC) can provide substantial tax savings for eligible Maine residents. If you graduated from a Maine college, and live and work in the state, then you may be eligible for tax credits based upon the amount of student loan payments that you have made during the year.
How to Claim the Educational Opportunity Tax Credit
Participation in the program is simple. All you have to do to take advantage of the Educational Opportunity Tax Credit (EOTC) is to complete and submit the Educational Opportunity Tax Credit Worksheet when you file your Maine income tax return. We highly recommend that you use the online Tax Estimator that can be found on our Resources page to determine the amount of tax credit you may be eligible for. This tool can also be used to complete the EOTC tax worksheet for individuals. For a hard copy of the blank EOTC tax credit worksheet click here.
The “benchmark loan payment” for your eligible tax credit is determined by your college, based upon a formula. If you completed an Opportunity Maine Contract with your school when you attended, you should refer to this document as it should list the amount of your “benchmark loan payment.” If you did not complete an Opportunity Maine Contract or cannot locate it, you will need to contact your college’s financial aid office so they can determine what the benchmark loan payment amount was for their institution for your year of graduation. The Benchmark Loan Payment Request Form can be completed and submitted to your school to solicit this information.
With the passing of LD 1657 this year, the eligibility for the EOTC has expanded. For tax year 2015, to qualify for the program, you must meet the following criteria.
Must have obtained an associate’s or bachelor’s degree on or after January 1, 2008 from an accredited Maine community college, college, or university.
For tax years beginning on or after January 1, 2016, must have obtained an associate or bachelor’s degree from an accredited Maine community college, college or university after December 31, 2007 but before January 1, 2016, regardless of whether the individual earned credit hours of course work toward the degree outside the State.
Must have obtained an associate or bachelor’s degree from an accredited Maine or non-Maine community college, college, or university after December 31, 2015; or earned a graduate degree from an accredited Maine college or university after December 31, 2015.
After graduation, an eligible individual must be a Maine resident working in Maine. This is defined by Maine Revenue Services as an individual who is registered to vote in Maine, resides in Maine, or maintains a permanent residence in Maine and spends in the aggregate more than 183 days of the taxable year in Maine, unless the individual is a member of the Armed Forces of the United States or works as a Merchant Mariner.
If both spouses are eligible, both may claim the credit on a joint return.
Please Note: Previously, self-employed individuals could not claim the EOTC for themselves. They could only claim the credit through their business for their employees. However, with recent expansions of the EOTC program, this has changed and self-employed individuals can now be eligible to claim the tax credit for themselves for eligible student loan payments made for Bachelor’s or an Associate’s degree.
Amount of the Credit
Below is a table outlining the monthly benchmark loan payment based upon year of graduation and type of degree:
Year of Graduation
* For 2008 and 2009 graduates, the benchmark loan payment is based upon the amount stated in the Opportunity Maine Contract the student signed with the college or university. If the student did not sign a contract, they can request the benchmark loan payment from their school using this EOTC Benchmark Loan Payment Request Form.
For 2010 and after, the monthly benchmark loan payment is calculated annually (by November 1st) by the State Tax Assessor, based upon the tuition and fees for the University of Maine System and the Maine Community College System using the current subsidized Stafford interest rate over a 10 year repayment term.
State of Maine Income Tax credit available for the actual eligible education loan payments made during the year, the eligible education loan payments due during the year, or the benchmark loan payment, whichever is less.
Credit is non-refundable (i.e. cannot exceed the Maine income tax amount) unless the degree is in a STEM field – Science, Technology, Engineering or Mathematics.
Tax credits for graduate degrees are non-refundable, even if they are STEM-based.
Unused portions of the non-refundable credit (for non-STEM degrees) may be carried forward for up to 10 years.
Payments made by a qualifying graduate directly to the lender for education loans that were certified by an accredited Maine college, community college, or university.
Payments made for loans associated with earning up to 30 credit hours for the degree at an accredited non-Maine college, community college, or university by a qualifying graduate who transferred to an accredited Maine community college, college or university after December 31, 2012.
Loans may include private education loans and/or refinanced education loans as long as the refinanced loan remains separate from any other debt incurred.
Only eligible student loan payments made during the part of the tax year during which the individual was a resident of Maine and working in Maine qualify.
Payments in excess of the required loan payment or the benchmark loan payment are NOT eligible for the credit.
Businesses looking for unique incentives to retain and attract quality employees should explore the potential of incorporating the Opportunity Maine program into their benefit offerings. The program can work to address two key issues currently hindering Maine businesses and consequently the region’s economy. It is well known that student loan debt is crippling many young Mainers as well as individuals across the country. In addition, Maine employers are facing serious shortages in finding qualified talent to fill their job vacancies. This restricts the capabilities of organizations to operate at maximum efficiency.
The Opportunity Maine program can help address these concerns by assisting Maine employers in attracting and retaining quality employees while also bridging the financial gap of student loan debt for their workers.
The employer program is relatively simple. Employers claim Maine income tax credits for eligible education loan payments they make directly to a lender on behalf of their employee. As long as the employee meets the eligibility criteria, the business can then receive maximum annual tax credits worth nearly $800 for an associate’s degree and over $4,000 for a bachelor’s. This is a huge benefit for employees, who are relieved of the stress and burden of their student loan debt. And it allows businesses to offer this distinct and extremely attractive benefit at a very low cost due to the tax credits they will receive through the program.